City comment

Edited by Kate Rankine, Deputy City Editor

(Filed: 21/06/2005)

Reluctantly, Sir Ken lets others ride into his one horse town

'There's always a man faster on the draw than you are, and the more you use a gun, the sooner you're gonna run into that man,' growled Burt Lancaster, as Marshal Wyatt Earp in the 1950s classic, Gunfight at the O.K. Corral.

Of course, no one is suggesting that yesterday's showdown between Sir Ken ("The Kid") Morrison and David ("Crockett") Jones was quite as thrilling as a Hollywood western, but it seems to have come awfully close.

The town (Bradford) just ain't big enough for the both of them and, in the end, it was the 73-year old Kid who lost the fight. Having blocked Crockett's candidates for non-executive directors - and instead coming up with one of Morrisons' suppliers as an alternative - Sir Ken was forced to back down.

He's not riding his horse outta town but three new non-executives, Nigel Robertson, Susan Murray and Brian Flanagan, will join the board from July 1, and the company is promising a further appointment within the next four weeks.

No wonder Sir Ken is said to be furious. For the first time in almost 50 years, the ol' gunslinger's power base is now well and truly eroded, and sadly he only has himself to blame. His head got too big for his stetson. Perhaps even he will now see that he should have welcomed other opinions into the board room, particularly given the mammoth task of buying Safeway, a company two-and-a-half times Morrisons' size.

Indeed, if heavyweight non-execs had been there while the deal was being contemplated, perhaps the company would never have ended up in such an appalling mess. It really was a deal too far.

Unfortunately, Sir Ken's fierce Yorkshire pride drove him into a corner. With some of his institutional shareholders even darkly threatening to pull the trigger of requisitioning an EGM to appoint non-executives, he had no alternative but to accept the three candidates on to the board.

The internecine strife is unlikely to come to an end. Mr Jones will now step up his search to find a successor to chief executive Bob Stott, and Sir Ken is likely to be encouraged to step up to life president of the business he created. Sadly it really is time.

Door on the housing market is still open

Homesickness is what you feel when you pay the mortgage, the old joke groans. Now the Woolwich tells us it isn't true. On average, we spend under 20pc of our monthly take-home pay, or £499, on servicing mortgages.

No wonder our appetite for mortgages is voracious. Who wouldn't want to own their home, if it only costs the same as it does to rent a three-bedroom home in a large city?

Even though we have racked up £1,000billion of debt between us, we are still borrowing 10pc more each year. Economists reckon we borrowed another £9billion pounds in May alone, and used the vast majority of it to buy property.

Such enormous sums have the power to strike fear into the hearts of people who feel that the economy is about to be buried under this mortgage mountain.

However, debt is what makes the capitalist world go around. If we stopped borrowing, especially when interest rates are low, a recession would occur immediately. After all, there is little to fear if we all have jobs - and therefore the means - to pay back the debt eventually.

House prices may be overly puffed up, and are no longer shooting up at stratospheric speeds, but they are showing few signs of deflating. In fact, the evidence suggests that people are starting to return to the housing market now that interest rates seem to have topped out. This time round, we are unlikely to suffer a crash. Bankers learnt their lessons from the early 1990s and now only advance 100pc mortgages to a select few.

Full employment means there will be few forced sellers, and the general agreement is that prices are more likely to go sideways for a while yet.

It is still a buyer's market. After all, we pay far more in taxes than we do on mortgages, and with government spending expanding madly, there is always the chance that inflation will return to gobble up the value of our debt.

DTI names a price, then adds a bit more

So the full cost of the nomenclature crisis at the Department for Trading Identities was more like £30,000. The figure might be little more than a rounding error when it comes to the billions of pounds in the Treasury's coffers, but it is a lot more than the figure its guv'nor Alan Johnson was hinting at shortly after he was installed in the post-election reshuffle.

The former postman originally claimed that the cost would be little more than the day rate for a man with a screwdriver. Even allowing for the small fortune needed to hire a (non-Polish) tradesman in the capital, the cost of the name change is pushing it a bit.

Setting aside Mr Johnson's silly concern that the "various descriptions... penis, dippy" might expose his department to ridicule, the naming cock-up at least showed that someone in Government was wondering what the DTI is for.

For instance, is it the Department of Tweaking and Indecision, or the Department of Terminal Incompetence? It is awfully tricky. Perhaps this silly wrangle about letters on the brass plate might make the mandarins think twice about imposing regulations and red tape on business. Don't bet on it.